Los Angeles Metro considers PPPs for three projects

The Los Angeles County Metropolitan Transportation Authority is pursuing three public-private partnerships stemming from unsolicited proposals sent to the agency.

The agency, known as Metro, received multiple proposals for both the $5.67 billion Sepulveda Transit Corridor project and the $4 billion West Santa Ana Branch light rail project. Additionally, Goldman Sachs proposed an “innovative financing strategy” for Metro’s ExpressLanes network that would allow Metro to focus on rapidly building out the network based on the entire network’s cash flows.

The projects were among 40 major schemes included in a traffic improvement plan, called Measure M, approved by Los Angeles voters last November. Under the agency’s unsolicited proposal policy established in February 2016, private sector firms can pitch ways to deliver these projects more efficiently than under traditional procurement.

California-based Parsons Transportation Group and an affiliate of Madrid-based Cintra each submitted proposals for the Sepulveda project, which is part of a $9.7 billion plan to link the Los Angeles Basin to the San Fernando Valley. Metro now plans to issue a request for proposals.

Skanska, a Swedish construction firm, and Nebraska-based Kiewit both submitted proposals for the West Santa Ana Branch project, which is looking to build a 32km light rail connecting downtown Los Angeles to south-east LA county. Metro said the resulting RFP will include elements of both proposals.

“We had planned to deliver the projects either as design-build or design-bid-build,” Colin Peppard, a manager at Metro’s Office of Extraordinary Innovation, told Infrastructure Investor. Proposals received suggested utilising a PPP approach, “each of which suggested concepts that we felt were compelling in a sense that we might want to incorporate some of them in the approach that we ultimately procure”.

While the ExpressLanes proposal will explore alternative financing methods, Metro expects to pursue traditional design-build contracts for operation and maintenance of the facilities.

The agency will now issue RFPs for the projects, a step that would have occurred much later in the process under traditional procurement, according to the agency.

“Among the benefits of these unsolicited proposals is that each carries the potential for significant cost savings if the projects can be built sooner, because construction costs rise over time,” said Phillip Washington, Metro chief executive.

Since launching its unsolicited proposal policy, Metro has received 82 such proposals including 10 for infrastructure megaprojects.

“It is not that the unsolicited proposal comes in and has all the answers,” explained Peppard. “It gives us an indicative sense of what could be possible if we broadened our thinking a little bit.”